BGH, 17.7.2003 - Set-off against a claim that had been awarded by an enforceable decision before the proceedings of the principal claim commenced

Abstract

This decision by the Bundesgerichtshof (German Supreme Court) was based on the following facts. The claimant sought to obtain from the first defendant the sum of ?3,916.32, being the remainder of a tax consultation fee. She initiated the action by a writ of summons dated 29 December 2000. During the court proceedings, the first defendant submitted that a claim for ?1,632.72, which had been awarded to him by an enforceable decision of the Amtsgericht (District Court) of Landshut dated March 2001, should be set off against the principal sum claimed. Thereupon the claimant unilaterally declared that the dispute had been settled for that amount, and claimed the remainder of the principal sum claimed. The declaration of settlement submitted by the claimant was dismissed by the District Court, on the grounds that the action had already been brought before court proceedings in the principal claim had commenced. Because of Article 389 of the German Civil Code, it was necessary to conclude that the action should be dismissed in the light of the time at which eligibility for set-off arose. The Court of Appeal, on the other hand, decided that the dispute should be regarded as settled to the amount of ?1,632.74. It was not the elibility for set-off, but the set-off declaration made during the court proceedings which constituted the decisive development which caused the action, which initially was admissible and well-founded, to become unfounded. The Supreme Court application brought against this decision by the first defendant was unsuccessful. The Supreme Court was of the view that, even though the set-off mechanism had retrospective effect under the substantive law (Article 389 Civil Code), it was the set-off declaration which constituted the ?decisive development? for an action which up to that point had been admissible and well-founded. It is only as from the moment when the set-off declaration is made that the substantive law effect of set-off, i.e. the extinction of the claim in the main action, is achieved. This effect is not yet achieved when the claim becomes eligible for set-off. The annotations below examine this decision from the perspective of Belgian, French, Greek, Dutch and Spanish law.